WASHINGTON: Finance Minister Ishaq Dar shaking hand with US Exim Bank Chairman Fre Hochberg prior to their meeting on Friday.—APP

WASHINGTON: Finance Minister Ishaq Dar has said that the government hopes to achieve 5 per cent GDP growth this year.

“We had inherited a highly fragile and broken economy… many pundits had bet the country would go into default latest by June 2014, when the reserves will be wiped out,” said the minister while explaining how the government fixed the economy in two years.

Speaking at Carnegie Endowment for International Peace, Washington, Dar said the government was now focusing on four major areas: sustained improvement, energy production, defeating extremism and enhancing education.

Dar also expressed the desire to improve trade and economic ties with neighbors, particularly Afghanistan and India.

The government took “unpopular decisions” for consolidating the national economy, such as long delayed and painful structural reforms in areas like taxation, energy and in the private sector, the minister said.

He said that the government also finalised a new IMF programme, based entirely on the economic agenda.

The minister also presented a paper in the US think-tank, highlighting various improvements in the national economy.

Economic growth averaged around 3 per cent in the five years before this government, now projected to rise to 5.1pc during 2014-15 as against 4.14pc registered during 2013-14. Last year’s growth was already the highest in the last six years.

Inflation averaged around 12pc in the five years before this government, brought down to 8.6pc in 2013-14 and is now projected to decline further to about 5pc in 2014-15. What is more significant is the year-on-year inflation, which was registered at merely 2.9pc in March 2105 compared to March 2014. This is lowest in 12 years.

Tax revenues, which had registered the poorest performances of a meagre 3pc growth in 2012-13, were up in 2013-14 by 16.44pc, rising from Rs1,946bn to Rs2,266bn.

Fiscal deficit registered at 8.2pc during 2012-13, has been brought down to only 5.5pc during 2013-14. This year’s target: 4.9pc.

Development spending:

Last year, it rose by 23pc from Rs360bn during 2012-13. This year, it will increase to Rs525bn, a nearly 24pc increase from the last year.

Credit to private sector, which had registered negative growth during 2012-13, rose by 10pc during 2013-14. It has further increased by 5pc from its level at end-June 2014.

Government borrowings from SBP: The government has continued to reduce budget’s dependence on SBP credit.

During the current fiscal year, the government retired nearly Rs.674 billion in the debt owed to the central bank.

This process will continue.

Balance of payments position: Marked improvement during the last 21 months, with current account deficit declining to less than 1 percent of GDP compared to more than 2pc in 2012-13.

Remittances: In 2013-14, the remittances rose by about 14pc, from about $14 billion to nearly $16 billion. In the nine months of the current fiscal year, remittances have shown an even higher growth rate of 15pc on the back of a considerably high base.

Exchange rate: has remained stable at less than Rs101 to a dollar for more than a year.

Foreign exchange reserves: In 2012-13, the country faced a precarious reserves position of less than $6bn and was required to pay $4.2bn falling due to IMF. On 13 April 2015, the reserves stood at $16.9bn, comprising $11.8 billion of SBP and $5.1. The HBL divestment of $764 million will take the reserves to nearly $17.7bn.

Karachi Stock Exchange Index, which stood at 19,916 on 11 May 2013, moved to 32,248 on 13 April 2015, showing an increase of nearly 62pc. The market capitalisation increased from Rs5tr to Rs7.1tr for the same period, showing a 42pc improvement. In dollar terms it increased from $51bn to nearly $70bn, showing an increase of 37pc.

Published in Dawn, April 18th, 2015

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